What’s my role?

2. Areti Moularas, Senior Manager What’s my role?

4. Where Are Duties Promulgated? • Federal Credit Union Bylaws • Federal Credit Union Act • Part 715 – NCUA Rules and Regulations “Supervisory Committee Audits and Verifications”

5. Number of Committee Members • The number of members is determined by the Board of Directors • Minimum number of members is THREE. The maximum is FIVE.

6. Terms of Service • The term is determined by the Board • The terms are one, two, or three years • All terms must be for the same period • Terms should be staggered to provide continuity of the committee • Regular terms expire after the first Board meeting after the annual meeting

7. Committee Leadership • Committee members select a Chairperson and Secretary • Chairperson and Secretary may be the same person • The Secretary must maintain a record of actions taken by the committee • Minutes of meetings should be kept and summarize procedures performed • Credit Union information is confidential

8. Who Can Be on The Committee? • Must be a member of the Credit Union • Must be bondable by the Surety • Employees and members of the Credit Committee are not eligible to be members

9. Goals of the Supervisory Committee The Supervisory Committee has two general goals: • Management’s financial reporting objectives have been met • Management's practices and procedures safeguard members’ assets

10. To Meet These Goals • The Committee is responsible for determining: • Management has established and maintained effective internal controls. • Management promptly prepares accounting records and financial reports to accurately reflect operating results. • Management properly administered the relevant plans, policies, and control procedures established by the Board. • Management has established policies and control procedures that safeguard against error, conflict of interest, self dealing, and fraud. • Generally, these determinations are made through conducting audits and verifications.

11. Actions of the Supervisory Committee • Audit – Once a calendar year, the Committee must have an audit completed • At least once every two years, your Committee must perform a member verification • California State Chartered CU is required annually • Your Committee must ensure that the Board is safeguarding assets and that management complies with their policies and plans • The Supervisory Committee must report to members at the annual meeting

12. Actions of the Supervisory Committee • Suspend, by unanimous vote, any Board Member, Executive Officer, or Credit Committee member. • Need to call a special meeting within 14 days to act on the suspension • Individual suspended must be given an opportunity to present a defense • The Committee may call a special meeting to consider a violation of the following: • Federal Credit Union Act • Rules and Regulations • Charter • Bylaws • Any practice considered unsafe or unauthorized

13. Responsibilities In Summary • Responsibilities are to ensure the policies and control procedures are sufficient to safeguard against error, conflict of interest, self dealing, and fraud.

14. Expectations of the Regulator • An Active Supervisory Committee • Familiar with the FCU Act, Bylaws, and Rules and Regulations • Understanding of accounting, auditing, and internal controls • Coordinates annual audit and member account verification • Development of an audit plan tailored to your credit union

15. Types of Audits • Supervisory Committee Audit (agreed-upon procedures) • Balance sheet audit • Full opinion audit • Report on internal controls related to the preparation of the call report

16. Supervisory Committee Audit • NCUA has detailed minimum procedures • These are MINIMUMS - Consider additional procedures • Sample methods and size need to be considered • Coordination of verification of accounts • Supervisory Committee is responsible for an effective audit, and must be in charge of the audit process • Sign engagement letter, select auditor, report from auditor

17. Opinion Audits • Highest level of audit coverage • Higher costs due to: • Risk Assessment Standards • Preparation of financial statements and other related reports • More audit procedures • More professional standards, which require more procedures, tests, and documentation

18. Member Account Verifications Part 715.8 • Methodology • Controlled Verification of 100% of member accounts • Statistical Method • Non-statistical Method – Option under an Opinion Audit • If performed by one independent person licensed by the state • Sufficient accounts in both scope and number • Additional procedures to be performed if confirmation evidence is not alone sufficient • Documentation of the sampling procedures used and their consistency with GAAS

19. Member Account Verifications Part 715.8 • Easiest and most efficient – 100% member statement message • Statement Message • “America’s Best Credit Union’s Supervisory Committee has engaged Moss Adams LLP CPAs to conduct a verification of member accounts. As a part of the verification, please review your account information on this enclosed statement, and should there be any difference, please provide a written response indicating the difference to Moss Adams LLP at Address, Seattle, WA 99XXX.”

20. Member Account Verifications Part 715.8 • Other Considerations • Focus on completeness of membership population • Consideration of no-mail accounts • Print suppressed • Consideration of E-statement accounts • Reconciliation of population of number of members to the number of statements issued • Control over “non-deliverable” mail returned statements • Retain documentation until the next verification is complete

21. Supervisory Committee Tasks • The Committee should perform the following tasks: • Follow-up on weaknesses or issues identified in audits or examinations and then monitor resolution • Review internal controls • Work with internal and external auditors • Meeting with examiners • Research member complaints • Complete other recommended procedures

22. Supervisory Committee Work Documentation • Documentation of Committee Work • Hold regular Supervisory Committee meetings • Document meeting and work performed in minutes • Follow your work plan and document when it varies • When performing testing in your plan, document what was tested and the results • Report results of audit and Committee work to the Board • Discuss findings with management, for resolution of findings • Failure of staff to follow plans, policies and procedures established by the Board • Insufficient policies and or procedures

23. The Oversight Checklist • The SC engages in an open transparent relationship with the chief audit executive (generally internal auditor) • The SC reviews and approves the internal audit charter annually • As a result of the discussions with the CAE, the SC has a clear understanding of the strengths and weaknesses of the credit union’s internal control and risk management systems

24. The Oversight Checklist • Internal audit activity is sufficiently resourced with competent objective professionals to carry out the audit plan, which has been reviewed and approved by the Supervisory Committee • Internal audit activity is empowered to be independent by its appropriate reporting relationships to executive management and the Supervisory Committee

25. The Oversight Checklist • The SC addresses with the CAE all issues related to internal audit independence and objectivity • The internal audit activity is quality oriented and has in place a Quality Assurance and Improvement Program • The SC meets regularly with the CEO about the performance and improvement of the CAE and the internal audit activity

26. The Oversight Checklist • Internal audit reports are actionable and audit recommendations are successfully implemented by management • The Supervisory Committee meets periodically with the CAE without the presence of management

27. Questions Areti Moularas Moss Adams LLP 360.685.2294 Areti.moularas@mossadams.com